Thursday, March 14, 2013

I would also think the wood bats are much harder than the Louisville slugger bats I used, but not as hard as the aluminum bat from the late 70’s. Would I be correct in that assumption? If so, how much extra distance (% wise) are the newer bats effecting the distance (if at all) , in comparison of the older Louisville slugger bats of in my day,1970’s and 90’s? Also, though it still happens, it seems the broken bat shards, that fly into the stands, or the playing field has lessened somewhat. Have studies showed improvement on that issue? Any and all input will be appreciated.

Fewer questions in one bundle would be appreciated, too, but I’ll try to cope.

1) You are certainly correct that modern bats are harder and have more shellac on them than the bats used back when you and Paul Waner were playing. Also the thin handles create less resistance and can be swung faster, although that may not be the main advantage of the thin handles. The other (and perhaps larger) advantage of the thin handles is that they lead to fewer either popped up or dribbled off of the “handle” end of the bat.

Maybe that’s not clear. Pitches that make contact with the “thin” end of the bat are very rarely hits, since that part of the bat is not moving very fast, and the round surface doesn’t lead to solid contact. When you reduce the diameter of the handle, you proportionately reduce the amount of “accidental contact” with the thin end of the bat, which eliminates a certain number of easy outs for the fielders.

2) 1990 is very different from 1970, so whatever the answer was to that one from 1970 would be very different from the answer in 1990. Also, I don’t know what the percentage increase in distance would be. I would guess it would be 3-4%.

3) I am certain that there has been very significant improvement in the number of shattered bats, and I know the commissioner’s office has worked hard on that issue. However, they’re trying to handle it quietly, without pubblicizing whatever it is that they are doing, so I really don’t know exactly what the differences are. But one can easily see that the number of shattering bats is way down.

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The one place (outside of actual science) where numbers and data are more incontrovertible than baseball would have to be the financial industry.

I get the philosophical point that bureaucracy is bad and you can't turn an ocean liner and all that. But big companies thrive in the US, and always have.

Investing in Coke, GE, Ma Bell, etc. Is a great way to beat inflation over just about any period you want to look at (unless you bought at the very peak of the "nifty 50" bubble.)
Where philosophy meets reality, it's best to side with reality.

I'll say it, James can be a smug, condecinding punk. He makes a statement about companies without researching it, and instead of saying, "wow, I guess I could be wrong. You guys have clearly put more thought into this than me." He responds with two or three word dismissals.

His point doesn't even make intuitive sense, if these huge companies were poor long term investments I think someone paying more attention than Bill James would have made that observation by now. I mean, I've lived in Springfield, AR. if big companies were a bad investment it would cone as a shock to all those Wal-Mart bag bous living in $3 M houses. I especially like the part were someone points out the Dow average has risen higher than inflation and he responds with two words.

C'mon, Bill - The larger advantage of thin handles is that balls off the fist are less likely to go fair? Really? This affects maybe 5 at bats a week, for a team. How about the fact that you can get more rotational acceleration (and thus "bat speed") due to the coupled forces at the hands operating over a shorter lever? In simpler terms, you can swing harder, EVERY ####### TIME!!!

pretty harsh, #3. He said bat speed MAY not be the main advantage of thin handles. In other words, it certinaly could be, but he brings in a new wrinkle. Okay, maybe he oversold the wrinkle a little, which is wha many of us do when attempting to talk about something we know that most other don't; we oversell a bit. I'm happy to consider the bonus information without calling him a blowhard.

And while I'm ragging, there were many fine insightful answers in the actual column. Scouting a shortstop's defensive abilities, and others. You don't like his investment advice? Fine. Skip the question and read the ones about baseball. And maybe we could even disucss the ones about baseball here, since it's BBTF, not $$TF, or POLITF (sometimes).

I thought at least part of the advantage of a thin handle is that there is less mass that will effectively hit the ball. In other words, the bat has much more the shape of a sledgehammer.

Also, your basic kinetic energy is (1/2)mv^2. Reducing the mass reduces the force, but you make up for it by increasing bat speed so force increases. So it makes sense to me that bats have become generally lighter than heavier.

I'm somewhat skeptical about Bill's thin bat handle explanation. Yes, in theory it may mean that fewer balls that hit the handle wind up in fair territory for easy outs. But wouldn't that be somewhat offset by more balls being swung at and missed for strike three rather than fouled off for another chance. Either way, it seems the effect would be very, very small.

People who point to the stock market averages and make calculations about return over time based on the growth of the averages miss a very important point: Dividends. Most of the large cap stocks which comprise the DOW pay nice dividends which in itself beat inflation.

You are certainly correct that modern bats are harder and have more shellac on them than the bats used back when you and Paul Waner were playing.

This was funny. But the thin handle response was simply retarded. The handles of today are what, a 1/2" thinner in diameter, at most, than the bats of 70 years ago? That's a 1/4" (at most) on either side of the sweet spot.

I don't think the difference in air resistance woudl be even measurable, let alone noticeable by a batter.

Odd statement by James that 'the game' has changed more than the rules and that rule changes are trivial vs changes in 'the game'. Er... what changes are we talking about? I hate comments like that were he says something is far more important than what people are discussing then refuses to even hint at one of those big changes.

Lets try to guess... the game changes year to year due to tinkering with the ball (lively vs dead, tight seams vs loose, etc.), drug use (see silly ball in the late 90's early 00's), surgery improvements (injured players back quicker and better), methods/materials used in bat creation, glove quality and size, and I'm sure there are many other things just not hitting me right now. All of those would be bigger than the first to third pickoff move. But hard to put more emphasis on any of those than on the DH, which was a rule change. Most rule changes are minor and effects are pretty much invisible to the casual viewer.

if he's thinking if you hitched your wagon to a particular company 50 years that was successful that company is likely gone now and your stock worthless (unlikely as companies get bought/merged/etc) but possible

if he's actually saying that long-term investing in equities is a bad idea then that flies in the face of everything we know about consumer finance and i am somewhat nonplussed.

Interesting that Bill would say such a thing about large companies when he downplays the effect of the DH at the same time. Certainly, the size of a company is a factor in its ability to change, but the length of the production cycle is more important. I'm probably more agile than your average 6 foot-8 guy, but I am not more agile than LeBron James.

People who point to the stock market averages and make calculations about return over time based on the growth of the averages miss a very important point: Dividends. Most of the large cap stocks which comprise the DOW pay nice dividends which in itself beat inflation.

A lot of time, returns are figured on the basis of dividends being reinvested. I can't tell from the question whether that's part of the 21x return, but it's possible.

The other thing is, the components of the Dow change over time, and it's the weakest investments that get removed. AIG was in there before being removed in 2008. GM was removed in 2009. Kodak was in there until 2004. Woolworth was there until 1997. And so on.

So you can't just, as the question implies, invest a dollar in "the Dow" as of 1963 and just sit there watching it grow.
It would be more interesting to select a basket of 15 or 20 large-cap stocks in 1963, and see where those exact stocks are now.

#17, You make good points. (Although, you can in the real world, invest as many dollars as you want in "the Dow" and capture the exact return of the Dow (minus small fees) via Vanguard and several other vendors. Index investing is a very good idea.)

Bill James is still very wrong, I believe, but I know all of that research has been done, many many times, and will try to find it.

To come up with a new financial insight, especially one so profound as "big companies suck", and expect it not to be challenged? Seems a bit silly.

On the other hand, the paragraphs of explanation/extolling scout work on evaluating shortstops is fascinating.

I'd love to see a new book from Bill James about the all-time greats who retired since he did his last player rankings, where they fit in, and the interesting things about them that we should remember for telling our grandkids.

His book on finance, or true crime, or his take on the ills of society? I'd rather not read it.

Someone smarter than me but catch the winners and losers, but off my half-baked guesses, you'd have a couple of obvious stinkers--US Steel, Sears, Woolworths--and some that are hard to figure (American Can is now part of Citigroup)--and some obvious big winners. I'd be surprised if you didn't come out well on that pool of investments.

I'll say it, James can be a smug, condecinding punk. He makes a statement about companies without researching it, and instead of saying, "wow, I guess I could be wrong. You guys have clearly put more thought into this than me." He responds with two or three word dismissals.

If you read the Abstracts and News Letters from 30 years ago you'll be amazed- James has essentially become the type of analyst/writer that he used to rail against. It's actually kind of sad.

Hey Bill, In regards to your answer about the top companies in the last 50 years, "And I'd guess you'd have lost money, inflation adjusted." You are essentially talking about the Dow Jones Average. I realize that the component companies change over time, but not really as much as one would expect. Same with the S&P 500. Here's a little research. On this day in 1963, the DJIA was at 677, and the S&P 500 was at 66, and we'll say $1 was worth 1.00. Today, the DJIA is at 14,455, or more than 21 times what it was in 1963. The S&P 500 is at 1,554, or more than 23 times what it was in 1963. The $1 that was worth 1.00 in 1963 is now worth 7.55 today. Of course, there are all kinds of qualifiers in there that I'm sure one could point out, but I think it's safe to say had you invested your money in those large companies you would have beaten inflation.

Asked by: RanBricker
Answered: 3/14/2013

I don't.

I don't see where James accepted the premises of the question, that in talking about top companies he was "essentially talking about the Dow Jones Average," although the "those" in the reader's last sentence passed without notice.

Has anyone looked at "top companies" and their performance since 1963? Are we defining top as "large"? If not, what's the definition? What has the performance of the largest 50 companies been? How much would as few as one company in 20 in your portfolio going bankrupt every 5 years affect the whole? Haven't "top" companies necessarily, by already being large at the point we acquire them, seen a good chunk of their value already realized (prior to the date we buy shares in them)? Aren't the greatest profits realized by buying into small companies?

There isn't nearly enough info here to conclude James is wrong.

edit: isn't going by the Dow selecting stocks after we already know how they're going to perform, both wrt the Dow dropping unsuccessful companies, and by using the Dow itself, which is hardly the only choice we could have exercised in 1963? The Dow has long been for uninformed public consumption. For years you couldn't even buy a fund indexed to the Dow.

edit: isn't going by the Dow selecting stocks after we already know how they're going to perform, both wrt the Dow dropping unsuccessful companies, and by using the Dow itself, which is hardly the only choice we could have exercised in 1963? The Dow has long been for uninformed public consumption. For years you couldn't even buy a fund indexed to the Dow.

This.

The original post by RanBricker was a LOL bad response, because index components change over time, and the "returns" he quoted are imaginary given index funds didn't exist for decades after 1963. And given the changing components, using index returns can't rebut Bills point, that holding the SAME big companies for many decades is a bad idea. Almost every index component stock that has ever failed, gone bankrupt, or shrank due to a declining business, has been removed from the index, often before its worst losses, meaning index returns certainly overstate the returns of holding the same large companies over many decades.

And dividends as previously pointed out in this thread are just another example of RanBrickers sloppiness, and Bills response was kind given the mess RanBricker made of it.

Bill expressed an opinion that holding stock in the same large business for many decades was a poor idea, essentially because they often lose their way, and advantages over time. There might be studies to rebut that specific point, but be wary of all industry research. Stocks are sold, not bought and there is a universe of bad studies created to be touted by salesmen, and every single one ignores the term "survivorship bias".

A big company usually doesn't react to consumer preference; it creates, controls and steers consumer preference. That's why it worthwhile for them to spend billions in advertising and lobbying.

This rule explains how Nokia and Blackberry crushed Google and Apple in smartphones, why GM and Chrysler could never go bankrupt, how IBM forced Dell out of the PC business in the 80s, why no web sites use open source software when they can buy packaged commercial versions from large companies, etc.

Proof is the 1984 industry darling Apple, with tremendous mindshare and who spent as much, if not more, on marketing than any other PC Vendor. They used these advantages to hypnotize consumers into ignoring the fact the Mac had limited third party support, couldnt be customized, and was mire expensive, making the Mac such a runaway success that Windows failed, DOS was abandoned, and Microsoft forced to go back to being a small vendor of programming languages. The Mac domination lasted for twenty years that culminated with it holding an amazing 3% market share.

Of course the most profitable PC maker in the world by far the last few years has been Apple's Macintosh line, and the Macintosh has been the fastest growing in sales over the last 5 years, again by a huge margin. I guess Dell, HP, and the vendors controlling the other 90% of the market are just biding their time until Microsoft pulls the rug out from under Mac sales by using their marketing muscles to tell consumers to stop buying Macs.

After all, didn't they just kill the iPad with their new Surface media blitz? Now consumers know the iPad doesn't "click" and that Surface makes you want to dance, and Microsoft is selling over 100m Surface tablets a year while Apple struggles to sell a few million iPads at prices that are most certainly costing them money. Wait, or did I get that backwards?

Well I at least know Albertsons and Safeway crushed that Arkansas hick Sam Walton when he started coming into their turf.

KT - your examples are true, but you're comparing big companies to big companies. Apple is a great example of advertising steering consumers. Apple sells the iLifestyle, in which you need the latest iPhone every 10 months or whatever it is, otherwise you're a loser.

Neither Apple or Google were in the phone business before the iPhone and first Android phones were released. Apple was barely 1/10 it's present size before the iPhone was released. Nokia and Blackberry were as big or bigger than Apple and Google overall at the time, and had far more advertising, marketing and product development resources devoted to making new phones, as well has having tremendous brand names and in the case of the former RIM, now Blackberry, tremendous customer lockin that made it extremely hard for competitors to get them to switch.

But apparently Apple and Google ran a few ads that said, "hey our stuff is better" and Blackberry users deserted in droves, and the largest most successful phone maker in history, Nokia, suddenly was gutted of it's sales. Obviously it had nothing to do with product features, price, or value, because any consumer decision that we disagree with can only be explained by "advertising" led hypnosis.

Apple is a great example of advertising steering consumers. Apple sells the iLifestyle, in which you need the latest iPhone every 10 months or whatever it is, otherwise you're a loser.

Non-Apple owners like to believe that, but it's actually the opposite. Apple makes top of line smartphones, if you have the disposable income to buy top of line, you are much more likely to replace your phone more often than typical users. Apple has never run a single ad saying replace your iPhone before your contract is up, it just caters to what could be called high income power users. Study after study has shown that iPhone users use far more web data than any other phone users, they buy far more apps, far more music, etc.

Apple didn't succeed through advertising, it succeeded through product marketing, which means it spends a great deal of time and attention to building the best possible products. It's key advantage has been that it controls every decision to make that so, ie. it makes the operating system so it can tweak it for any need, such as autoconditioning software so their phones/laptops can have higher capacity non-replacable batteries and longer batter life in smaller, lighter products. It has lots of capital to invest in special components, automated aluminum milling machines, custom A5/A6 processors with integrated GPU components to enable retina displays, etc, whatever it thinks will make the product better.

Apple created the iPad first, Jobs rejected it as not good enough. They adapted the iPad software to build the first iPhone, Jobs rejected numerous prototypes over a couple years until they finally solved the problems that those who had tried to make a touchscreen phone before them had missed, the proximity sensor that prevents accidental taps while on a call, the right form factor, size, hardware features, the right UI, etc.

None of this has anything to do with advertising. Advertising is how you communicate the value of your product to others. Without that value to communicate, you can only succeed through fraud, and that's a short-lived business model. Ask the Extenze guy.

Android succeeded not because of the product, Google came out with what was a good but not great product at first, but because it turned the industry upside down with a far superior business model. Android can power anything from the cheapest phone to the top line phones that match iPhones feature for feature (or are better if you like bigger screens). It did sacrifice some things, Android devices are harder to develop for due to fragmentation, so many different phones, screens, capabilities. Since Google is several steps removed from end users, it can't force venders and phone companies to update users with the latest greatest version of Android, so the vast majority of Android phones are running older software that is less competitive with iOS 6.

Apple has become the most profitable business on the planet for 3 reasons

1) it makes the best pcs and laptops in the world at a much smaller price premium than it historically was forced to charge, due to it's adoption of Intel processors. It's integration of OS and hardware means it can make lighter, longer battery life laptops with better screens than PC vendors stuck waiting for MSFT to catch up. The fact you can run Windows & Unix software on Macs within the Macintosh operating system means Mac users get the best of all worlds and have the true no compromise experience (someone tell Balmer). They put a lot of thought into automating and making thieir computers as simple to use as possible, their wireless router has a 1 terabytes of storage that automatically backs up all our home Macs without me doiong almost anything.

Right now Apple is likely making more profits selling Macs than all Windows PC vendors world wide combined.

2) It provides the best, most integrated experience for high end smartphone users with the iPhone. You can get everything from itunes you want, music, tv shows, movies, apps, etc. It syncs all of them with your Mac, your AppleTV, all automatically (my wife often plays music from my massive iTunes library over our surround sound while me and my phone are at work, in 2 clicks from our AppleTV). The phones are excellent quality, great screens, cameras and battery life among the best available. Once you buy an iPhone and take advantage of their ecosystem, you are less inclined to switch and they have 300M+ adoptees so far. Sure they aren't perfect, Apple is too closed off and would benefit from opening up the OS so iPhones could be as customizable as Android phones, but overall they are still very strong products and that ecosystem offers users a great deal of value.

Apple is earning about 75% of all smartphone profits right now because phone users with higher than average incomes feel they get extra value not just from Apple's phones, but the software, synchronization and ecosystem. The proof is in industry analysis, study after study that shows the vast majority of web pages being surfed from mobile devices are being read on iPhones despite iPhones being outnumbered by Android phones. iPhone users are getting a lot more usage out of their device than the typical android user for some reason, if it's not UI, ecosystem, value, what is it?

3) It provides the best tablet experience bar none. Google and Amazon beat Apple to the smaller tablet market by a couple months with tablets that had better screens, that they sold at a loss so they were much cheaper than the iPad Mini, and got crushed. That confused people, sure the mini is better made, has some better hardware features, battery life, but cost and screen are far more important, why are people such sheeple!??!?

The answer is software, apps & ecosystem. Developers have written something like 300k iPad apps that take advantage of the bigger screen and custom UI features. Android only has a fraction of that many tablet apps, because the fragementation of so many different screen sizes, Android versions, etc makes it so hard to build them, so Android tablet users have to use more phone apps that don't take advantage of the better hardware they paid for. Apps are a huge part of using a tablet for most people, using GarageBand or an astronomy program custom built to take advantage of the screen and processor is amazing. And even the better screens didn't make the Nexus and Kindle FIre tablets better for web browsing, Apples VP of Marketing gave a tremendous demo where he showed how UI enhancements to safari actually gave users the ability to see more of a web page than Amazon's bigger screened device displayed.

Google and Amazon found that selling something cheaper doesn't make it a winner if it has less value, the vast majority of customers chose to spend $329+ on a Mini that could run great apps and was great to use, over a $200 device that was destined to be a doorstop much sooner since it was only useful for web browsing. Apple is still selling over half the tablets worldwide, and has probably close to 90% of the market's profits, and Windows PCs sales are now actually declining, partially due to Mac growth, but mainly due to people replacing cheap laptops with tablets.

When I used to commute for work cross country I would watch all the TV shows I missed on the flights on my MacBook Pro. I never had to remember to get them, they were always just synced there properly. Or I'd listen to my latest albums that I'd bough on my phone, that again were automatically synced to my MacBook. Every movie, every song, every tv show, every app we ever bought on iTunes is still available on every single apple device we own, all I have to do is log in with my account. That ecosystem and synchronization adds substantial value to their hardware.

Sure you can do all of this with Windows, Android, etc. but Apple (usually) makes doing so significantly easier. If your time is valuable at all, you are going to always pick products that give you similar benefits but with hours less setup and learning time. If someone barely makes minimum wage, I can see how Apple's advantages will seem like over-rated, over-blow crap to them. If I was that minimum wage guy starting my way up the ladder, I'd happily spend a few extra hours of my free time doing doing my own setup/install/configurations and finding cheap third party software to provide the same features if it saved a few hundred bucks. But my time is far more valuable than that.

Apple can advertise all it wants, but if users don't find enough extra value in their products to be worth the 20% premium they charge, they'll rapidly lose customers and market share. It will probably happen someday, but not for a long while.

1) it makes the best pcs and laptops in the world at a much smaller price premium than it historically was forced to charge,

Ever read Isaacson's book on Jobs? Just one of the disputes that paved his exit from Apple in the 1980s was over pricing, - Jobs believed that that Apple was pricing things like the original MAC far higher than necessary- and told Isaacson that pricing "decisions" comprised the single biggest mistakes made by Apple at that time- Apple wasn't "forced" to charge a price premium.

BTW: the reason people like to believe in the hypnotic ability of advertising isn't just because of Don Draper's Superman like character, but it's a way of explaining customer behavior that we don't understand. I understand that because it can be really hard to understand and explain customer behavior in some markets, but that doesn't make believing in advertising any less intellectually lazy than believing in astrology.

Marketing is hard. Advertising is one component of it, maybe the hardest one of all since it can be so intangible, but PR is very difficult as well. Product Marketing can give you much more tangible data and feedback, but is still very hard.

I am an iPhone app developer, or at least have been one for almost a year. Me and my partner often have relentless debates centered around what we think our customers want, and don't want. The debates are far too often circular given my partner and I don't have the data, or access to the customers that we need (thanks a lot Apple) to resolve them. The answer has been relentlessly collecting any data we can, and finding more creative ways to reach customers hidden behind the iTunes wall to learn their opinions, wants and needs.

There are 300M+ iPhone users. I have good reason to believe if I could find a way to tell all 300m about my $2.99 app and the value it can provide them (and it's a unique product with no similar competitor), somewhere between 10% and 30% would snap buy it.

So how do I do that? Ah, that's the magical mystery of marketing. We don't have the budget for running mass market superbowl type adds repeatedly long enough to reach them. We don't have the budget to run local cable system ads, or buy one pagers in magazines, or even tiny ads in the back of magazines.

We have a plan that we are unrolling. Over time if it's successful maybe we can reach almost everyone and sell tens of millions of units. And someday pay me a salary. But it's a war fought one battle at a time, every day, with every marketing effort be it PR, an advertisement, a partnership, a giveaway, etc. We measure everything we can so our tiny budget is focused on only the best opportuniitie so we can slowly build our sales until it those sales pay for a budget that can fund mass market endeavors that hopefully will be even more cost efficient.

If I figure out something magical and hit the lottery and make a hundred million dollars, I just pray someone will come along and say that it was all just advertising, and our customers are just deluded suckers so it must have been easy. I'd quite enjoy that.

Ever read Isaacson's book on Jobs? Just one of the disputes that paved his exit from Apple in the 1980s was over pricing, - Jobs believed that that Apple was pricing things like the original MAC far higher than necessary- and told Isaacson that pricing "decisions" comprised the single biggest mistakes made by Apple at that time- Apple wasn't "forced" to charge a price premium.

I did read the book, IIRC Sculley et all didn't believe the volume would materialize, and Jobs was winging it as usual by the seat of his pants.

Apple's premium can be lower with volume, it's not just the intel chips that did it. High volume can turn their inventory super fast, and even though they make a smaller profit per unit, overall they can make more profits. Another example was the widespread rumour they locked up most of the flash ram chip production when the iPhone first came out, giving them a cost advantage because of the discounts they got for making such a huge commitment.

The thing about Jobs was that he was frequently wrong, sometimes insanely so. But one of his best attributes was that he was flexible enough mentally to often realize when he was wrong and would switch gears in a heartbeat back onto the right course. So if he was wrong about Mac pricing he would have relented pretty soon before it caused too much damage, and if he was right they missed a huge opportunity.

The amazing part of the egotist Jobs is he rarely wrapped his ego around the decision itself, just who was responsible for it. So many stories of him being deadset against a good idea for the wrong reasons, sometimes forcing the ideas advocates to tears, to quit, etc. Then one day they find out that Apple has done a 180 the blink of an eye and is now pursuing their idea, because Steve apparently just thought of it and is really excited about telling everyone about his great new idea.

I did read the book, IIRC Sculley et all didn't believe the volume would materialize, and Jobs was winging it as usual by the seat of his pants.

"NOT ####### BLUE ENOUGH!!!"

Jobs had a great streak on his return to Apple just winging things, unfortunately, one of his business side proteges screwed up anything that could be screwed up when he took over Penny's and began winging everything.

Making a by the seat of your pants decision that works is doubly great- all the gain without incurring many of the expenses normally associated with making a product decision (testing, surveys, meetings, etc...) but when it doesn't work, when something as simple as a pilot project would have told you it wouldn't work, ouch.

There are 300M+ iPhone users. I have good reason to believe if I could find a way to tell all 300m about my $2.99 app and the value it can provide them (and it's a unique product with no similar competitor), somewhere between 10% and 30% would snap buy it.

So how do I do that? Ah, that's the magical mystery of marketing. We don't have the budget for running mass market superbowl type adds repeatedly long enough to reach them. We don't have the budget to run local cable system ads, or buy one pagers in magazines, or even tiny ads in the back of magazines.

Great post, KT (#27). My partners and I are having many of the same thoughts as you've just expressed. The product is fabulous and was a huge success on a one store retail level, and the feedback is universally positive. But as you say, figuring out how to reach the millions of potential customers on a small budget is the trick. We've been steadily growing every year through word of mouth and a bit of publicity, but the sales are still but a tiny fraction of their obvious potential.

Has anyone looked at "top companies" and their performance since 1963? Are we defining top as "large"? If not, what's the definition? What has the performance of the largest 50 companies been?

A good proxy would be ING Corporate Leaders Trust, aka Lexington Corporate Leaders Trust. This trust bought stock in 30 of the largest companies in 1935. The holdings of the trust have changed only by spinoffs, mergers, and the selling of companies deemed to be in serious financial trouble.

The trust has handily beaten the S&P 500 for virtually any period you select. See:

KT - your examples are true, but you're comparing big companies to big companies. Apple is a great example of advertising steering consumers. Apple sells the iLifestyle, in which you need the latest iPhone every 10 months or whatever it is, otherwise you're a loser.

The rise of Apple wasn't so much "lifestyle" - it was finally getting that ecosystem right... The Newton failed long before the iPhone and iPad - and when you look at the current big 4 (Google, Facebook, Amazon, and Apple) - that's what got them to where they are... getting a whole ecosystem right (or, at least right enough you can't resist dipping your toes in).

What made Microsoft the big player of the previous decade is that - for a variety of reasons (some legal, some ham-handed efforts) - they never could quite get that right and eventually, decided to just go with the flow of playing nice (or at least, allowing users to play) with others. In the interim, while no one was able to get anyone wholly into their pool -- this made MS king, as MS could be sure they'd at least have a foot in the door. That was better than being on the outside looking in.

What will be interesting to me is what happens next... I think Apple has already peaked - I mean, a wristwatch? good luck with that one - and really, they haven't done anything since taking tablets big time that's all that revolutionary or groundbreaking. Google is doing some interesting stuff, and love it or hate, I think Facebook is the only one that can give Google a run for its money big data capture and big data usage wise. Amazon's playing technological catch-up, but they've also got the advantage of being places the others either don't or don't care to be.

...and it wouldn't shock me if the next 5-7 years see Apple and Microsoft do a bit of position flopping. Apple can still do UI's better than MS - but on a certain level, Windows8 really is a good idea in theory.

You can talk about the death of the desktop all you want, and sure - go ahead and imagine a world without even laptops - but there's always going to be enterprise level needs for these things... and right now - development for anyone who has no choice but to develop for multiple devices is a real pain. An OS that that can device agnostic is a really, really big deal. People will get used to losing their start button just like they got used to losing the fins on their cars - the question is whether MS can sort of stick around in the periphery (like Apple did for a while) until they can get it right and carve out justenough usage on devices running on their OS to stay in the game.... not saying I'd bet ON them, just that there are worse longshot bets.

one of his business side proteges screwed up anything that could be screwed up when he took over Penny's and began winging everything...

following that train wreck has been pretty interesting. WSJ had a great piece a few weeks ago. One of the things the new Penny's crew discovered upon takeover, was that the employees at the home office in Plano were spending 30% of its 'bandwidth' on a daily basis watching you tube videos. Funny, to be sure, but the results of the new Pennys have been dreadful.

and the "returns" he quoted are imaginary given index funds didn't exist for decades after 1963.

John Bogle launched his 'First Index Investment Trust' at the end of 1975 (later named Vanguard 500 Index, it tracks S&P though). DFA introduced their index funds in the early 80s. By the way, they were all ridiculed and mocked for years.

You can talk about the death of the desktop all you want, and sure - go ahead and imagine a world without even laptops - but there's always going to be enterprise level needs for these things... and right now - development for anyone who has no choice but to develop for multiple devices is a real pain. An OS that that can device agnostic is a really, really big deal. People will get used to losing their start button just like they got used to losing the fins on their cars - the question is whether MS can sort of stick around in the periphery (like Apple did for a while) until they can get it right and carve out justenough usage on devices running on their OS to stay in the game.... not saying I'd bet ON them, just that there are worse longshot bets.

The big thing for MS is their Office products. Try to get someone to use a different mail client than Outlook. They'll always have a toehold there.

A good proxy would be ING Corporate Leaders Trust, aka Lexington Corporate Leaders Trust. This trust bought stock in 30 of the largest companies in 1935. The holdings of the trust have changed only by spinoffs, mergers, and the selling of companies deemed to be in serious financial trouble.

The trust has handily beaten the S&P 500 for virtually any period you select. See:

Lexington Corporate Leaders.

James wasn't just wrong on this topic, he was extremely wrong without doing any research and then dismissing any rebuttal.

If he's wrong about holding large companies over very long periods, a trust that sells companies "deemed in serious financial trouble" and bought into Berkshire Hathaway along the way isn't anything approaching proof of it.

John Bogle launched his 'First Index Investment Trust' at the end of 1975 (later named Vanguard 500 Index, it tracks S&P though). DFA introduced their index funds in the early 80s. By the way, they were all ridiculed and mocked for years.

Bogle is a genuine American hero, and index funds are absolutely the way to go for virtually everyone who needs stock market exposure.

But they have little to nothing to do with Bill James point, since indexes are rebalanced yearly.

James on the SS question was excellent. The following never occurred to me explicitly before, but of course it's true once you think about it:

Another thing. . .we used to have a minor league shortstop in our system named Soto. REALLY impressive athleticism, although he was a little bigger-bodied than your typical shortstop. He was built kind of like Miguel Tejada. He had a tremendously strong arm, and I thought he was a shortstop, but I was talking to one of our scouts, who said, "Oh, he's not a shortstop. He can't throw off-balance. A shortstop has to throw, in a game, from 50 different angles. Soto can only throw if he sets his feet and throws. He'll have to go to the outfield."

And I watched him, and. . .sure enough, you could see it immediately once it was pointed out to you. He had a cannon when he could plant his feet and throw, but if he had to throw off-balance, he couldn't BEGIN to locate the target. And he couldn't learn to do it. He had to go to the outfield, and his career fizzled.

Makes me wonder, though, if the Sox ever got creative with Soto. You'd think a guy with a great arm could take plenty off a throw and still get it to first. How about standing him on a barrel turned on its side, then giving the barrel a push towards 2B? See if after a hundred reps the guy can start to get the hang of an off balance throw. At least you'd have identical reps through which to show him how it's done.

and index funds are absolutely the way to go for virtually everyone who needs stock market exposure.

I don't like index investing, it has insignificantly lower risk than a random portfolio of say 20 stocks while it eliminates all upside potential. An index portfolio is diversified far beyond the point of diminishing returns.

I don't like index investing, it has insignificantly lower risk than a random portfolio of say 20 stocks while it eliminates all upside potential. An index portfolio is diversified far beyond the point of diminishing returns.

I disagree with this portion. I could name some 'actively managed' funds by name to illustrate this point, but highly concentrated portfolios (which while not random) with say 30 stocks are typically much more 'risky' when looking at funds in their style box compared with an index. The 'upside' potential is the entire basis for choosing active management over index investing (and I do like and invest using several active managers mostly micro and small cap) , but nearly all active managers will trail their benchmark during some portion of their 'run'. The debate never dies, and there's plenty of persuasive arguments on each side. The problem is there's lots of active managers charging you more to trail their benchmark index.

The reason index investing is a (not the only) good strategy of long term investing is the 'set it and forget' component, which is grounded in the fact that over the long term, returns net expenses in a large component index fund are an entirely suitable and successful investment for a large segment of the investing public. (exposure to the stock market is a good thing, and it is easiest and cheapest to do so in an index fund).

Your last point is correct as well, but there are plenty of 'passively managed' index type portfolios which do help mitigate the 'overdiversification' of a Russell 2000 type investment.

I don't like index investing, it has insignificantly lower risk than a random portfolio of say 20 stocks while it eliminates all upside potential. An index portfolio is diversified far beyond the point of diminishing returns.

EDIT: Deleted my answer. It's in the middle of the night here and that was barely coherent. But Portfolio theory is all about mitigating downside without giving up too much upside, there are free lunches...

Not sure what you mean here... I don't have stats on this or anything, but it seems obvious that tons of people have moved from using a desktop e-mail client to using a web-based and/or mobile one. Surely we can't say that those people don't count because, rather than switching to a directly competing product, they decided they no longer needed the product at all.

As far as I can tell, Excel and PowerPoint are the only Office programs for which there is currently no plausible competitor. (Excel because it is legitimately the best spreadsheet, PowerPoint pretty much entirely due to ubiquity.)

James has backed off his position, in his way:

you guys invest in big companies; I'm going to invest in small ones. I don't doubt that you will come out ahead. I don't believe in big companies, anyway.

When the company I worked for got bought out by another one, we had to switch from MS Outlook to Lotus Notes for our email/calendar/chat suite of software.

I didn't think it was possible, but I LONGED for the days of MS Outlook. Lotus Notes is big steaming pile of crap. The calendar portion had some nice features, but the email client was absolute garbage.